“Stocks Bounce and Havens Drop as Korea Fears Abate: Markets Wrap.”
Stocks around the world advanced and volatility gauges fell as the prospect of war between the U.S. and North Korea appeared to recede. Havens including gold, Treasuries and the yen fell.
U.S. stock opened higher, with the S&P 500 Index and Dow Jones Industrial Average higher. The Chicago Board Options Exchange Volatility Index fell below 13 after topping 16 on Aug. 10. The Stoxx Europe 600 Index headed for its first gain in four days, tracking increases across markets including South Korea, Australia and Hong Kong. Most European government bonds followed Treasuries lower. Bitcoin posted yet another surge.
Meanwhile, there was a mixed bag of data out of Asia on Monday. Japan’s second-quarter growth topped estimates, reflecting better domestic demand. China’s economy posted its worst showing this year as curbs on property, excess borrowing and industrial overcapacity began to have an impact.
“Korea tensions ease slightly as U.S. officials play down war risks.”
Tension on the Korean peninsula eased slightly on Monday as South Korea’s president said resolving North Korea’s nuclear ambitions must be done peacefully and U.S. officials played down the risk of an imminent war. Concern that North Korea is close to achieving its goal of putting the mainland United States within range of a nuclear weapon has underpinned a spike in tension in recent months.
U.S. President Donald Trump warned at the weekend that the U.S. military was «locked and loaded» if North Korea acted unwisely after threatening last week to land missiles near the U.S. Pacific territory of Guam.
«There must be no more war on the Korean peninsula. Whatever ups and downs we face, the North Korean nuclear situation must be resolved peacefully,» South Korean President Moon Jae-in told a regular meeting with senior aides and advisers.
While backing Trump’s tough talk, U.S. officials including National Security Adviser H.R. McMaster played down the risk on Sunday of the rhetoric escalating into conflict.
U.S. Central Intelligence Agency Director Mike Pompeo said North Korean leader Kim Jong Un might conduct another missile test but talk of being on the cusp of a nuclear war was overstating the risk.
“Factory slowdown dents confidence in eurozone economic boom.”
Industrial output in the eurozone fell in June in an uncomfortable drop that suggests the economic boom may not be as strong as analysts hoped. Germany’s monthly output fell by 1.1pc while Ireland’s crashed by 7.5pc in the choppy short-term index. French industrial output dropped 1.2pc. Among the larger economies growth was recorded in Italy, at 1.1pc, and the Netherlands, at 1.2pc. Industrial output in the EU overall – including the eurozone and member countries that use their own currencies – shrank 0.5pc in June.
The monthly numbers can be volatile and economists still believe the industry is on a positive trajectory, but the monthly drop means they are becoming more cautious on the overall growth outlook.
“Looking ahead, the outlook for eurozone industry is fairly bright. While the manufacturing purchasing managers’ index fell in July, it remained higher than at the beginning of the year. And the European Commission’s measure of sentiment in the industrial sector points to continued strong annual output growth,” said Bert Colijn, senior economist at ING.
“Canada suggests it could quit NAFTA talks over dispute mechanism.”
Canada laid down a tough line ahead of talks on modernizing NAFTA on Monday, suggesting it could walk away if the United States pushed to remove a key dispute-settlement mechanism in the trade deal.
Canada opposes Washington’s plan to scrap the so-called Chapter 19 dispute settlement mechanism, under which binational panels made binding decisions on complaints about illegal subsidies and dumping. The United States has frequently lost such cases. «Canada will uphold and preserve the elements in NAFTA that Canadians deem key to our national interest – including a process to ensure anti-dumping and countervailing duties are only applied fairly when truly warranted,» Foreign Minister Chrystia Freeland said in a speech at the University of Ottawa.
Freeland also said NAFTA needed to be updated to take into account massive advances in technology. tougher labor safeguards and stronger environmental provisions, «to ensure no NAFTA country weakens environmental protection to attract investment.